"appealed to NEMA to re-open the factory as they met all the conditions set. Incompliance with legalrequirements could lead to huge losses for instance when the plant had been closed down.OpportunitiesAccording to KAM (2012), Kenya has a well-developed construction industry. The industry is currentlyon an upward trend following rehabilitation and reconstruction of roads and bridges under the KenyaUrban Transport Infrastructure Program. The growth in the construction industry presents a lucrativeopportunity for ARM to grow its market share. Yager (2012) posits that Kenya has five cement producerswith a combined capacity of 5.7 million tons per year. National cement production increased to 3.71million tons in 2010 from 3.32 million tons in 2009 (Yager, 2012). Demand for cement is likely toincrease to 3.9 million tons in 2013 and 4.6 million tons in 2015. In Burundi, Rwanda, Tanzania andUganda the demand is expected to grow to 8 million tons in total in 2015 from 5 million tons in 2010(Yager, 2012). The increase in demand can benefit ARM with increased sales.ThreatsNew entrants into the market together with cheaper imports threaten ARM’s market share as they increasecompetition and affect prices (Nyabiage J., 2011). Low cement tariffs introduced by the EAC in 2008 tomeet demand has led to the local markets flooded with cheaper imported cement. Major exporters ofcement to Kenya for example Pakistan have subsidized transport costs for its exports making its cementcheaper in Kenyan market when compared to locally manufactured cement adds Nyabiage J. (2011).ARM also faces a major challenge due to poor infrastructure and unfavorable weather conditions at someof its factories. According to Muiruri (2012) rains caused havoc in Mavoko (Athi River) and the wholeregion was soggy. This slowed down production and brought in challenges. The company is also likely toface logistics problems in times of heavy rains thus posing a threat to the company’s operations.ARM’s expansion plans in Bahati constituency is facing a major threat due to resistance by the localcommunity in that region. According to Masha (2012), conflict is brewing between the residents andARM over plans of the firm to acquire 500 acres of land for limestone mining. Villagers declined to havea meeting with ARM’s management that was led by the managing director.CONCLUSIONARM’s financial performance during the three years under review was good. Revenue grew 15.9% in2010 and 37.2% in 2011. The gross profit and net profit also increased during the years. However,ARM’s liquidity position was not as good as its competitors’, it had a current and quick ratio below thatof BCL. Cash flows also show deteriorating liquidity and it looked like ARM faced a liquidity crisis.ARM also lags behind in efficiency ratios and thus has liquidity problems as a large working capital isrequired. ARM is highly geared which means that the company is facing a high financial risk which canbe a threat to its survival especially when the company is also facing liquidity problems. When it comesto investors’ ratios, ARM managed to do well and in general, shareholder wealth was increased.ARM managed to do well in comparison to BCL. The increased capacity and diverse product portfolioenabled it to increase its revenue and therefore profits.The macro economic factors affected ARM in both ways. Some factors like increase in demand ofproducts, urbanization, political stability, new modern plants, environmental friendliness led to positive effects on ARM while changes in foreign exchange rates, stringent environmental laws, stiff competitionfrom cheaper imports, slowing growth in real estate market, power outages among others made thingsdifficult for ARM.ARM has got a number of strong points that enhanced its performance during the period under review.Some key points were the ability to build plants at a lower than average cost, diversified product portfolioand diverse markets. However, it had a number of weaknesses too. Foreign exchange rate depreciation,scandals and incompliance are the main weak points. ARM has got opportunities; demand for cement isexpected to grow not only in Kenya but also other East African countries in which ARM has markets.ARM with other manufacturers are pushing to raise duties on imported cement. If this is done, ARM willbenefit. ARM faces threats like new entrants into the market, competition from imports, poorinfrastructure, bad weather and opposition from local communities. RECOMMENDATIONSThe directors should review their operating strategies to try and improve efficiency ratios as well asliquidity. They also need to improve on cost control taking into account the increase in administrative andfinance costs. They also need to lay strategies to make the optimum use of the assets of the company togenerate revenue. The finance director together with other board members should try to reduce the high financial risk thecompany faces. Debt should be reduced and equity increased. A rights issue to pay off some debt may beuseful. Since most of the debt is in foreign currency, the directors should consider increased use ofhedging techniques to shield from that risk. 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